Wednesday, January 26, 2005

We got there first

Just every now and gain – but not too often, we like to preen ourselves at being ahead of the game. Thus it was last Sunday that we ran a piece on the spat between Poland and Spain over the share-out of the eagerly awaited EU budget settlement.

Here we are now on the Wednesday and the same story is being carried by the Financial Times, a newspaper which, itself, is often in front of the pack.

The additional detail, however, makes the story worth revisiting, but the essence remains the same. Friction between Poland and Spain, says the FT – trailing in our wake - is jeopardising the efforts of poorer EU members to fight for a larger EU budget, to the delight of the six countries that pay more to Brussels than they get back.

Both Spain and Poland are big net beneficiaries from the EU's €100bn annual budget, and were working together to fight for a big regional aid programme in the next budget, which runs from 2007-13. But when it became clear that the net contributers to the EU budget, including Britain, Germany and the Netherlands, wanted to divert development aid away from the so-called Club Med countries of southern Europe to the new members in the east, the alliance between Spain and Poland became strained.

What is interesting is the attempt to paper over the cracks, with Jaroslaw Pietras, Poland's European affairs minister, insisting that Warsaw and Madrid remain close, if abrasive, allies, but if the EU's aid budget shrinks, Poland will fight hard to protect its share of the money. "The Spanish have to recognise that without satisfying our interests they won't have our support," he says. That’s fighting talk, if ever I heard it.

In 2003, says the FT, the emerging Madrid-Warsaw axis, was the talk of Brussels diplomats. But the election of José Luis Rodrguez Zapatero in Spain last year was followed by a bust-up with Poland as he sought to rebuild ties with France and Germany and fight for Spain's interests in the face of impending cuts in its EU funding.

Spain's new foreign policy, we are told, spelled the end of the alliance with Poland over the EU constitution, where the two middleweight countries (both have populations of about 40m) had fought to protect preferential voting weights that gave them a disproportionate influence in EU decision-making. Tensions came to a head before Christmas when attempts to rekindle the alliance - this time in negotiations over the next seven-year EU budget - collapsed.

The flashpoint ahead of the EU December summit occurred when the Dutch EU presidency drafted a communiqué saying that most of the EU's regional aid should be concentrated on new member states, mainly from central and eastern Europe. Spain, predictably, fought the proposal.

"The least you can expect is a degree of loyalty," fumed a Polish diplomat, pointing out that Spain was much wealthier than eastern Europe and had enjoyed high levels of EU support for nearly 20 years.

The FT citesJosé Ignacio Torreblanca, a senior analyst at the Real Instituto Elcano, Spain's leading foreign policy institute, saying that frictions were almost inevitable over the budget negotiations. "If the contribution of member states is capped at 1 per cent of gross domestic product, as Germany wants, the battle for the spoils will become a zero-sum game. "What Poland wins in structural funds will be Spain's loss. If the budget is increased, there will be more money for all," he said.

The FT thinks that officials in Warsaw may now strike a deal with the net payers: agreeing to a smaller EU budget capped at 1 per cent of GDP in exchange for an agreement not to cut aid to the poorest regions of the Union from the level they would receive if budget contributions were set at 1.14 per cent of GDP.

The split between Poland and Spain over the budget is a gift to the net contributors, which want to drive a wedge between net recipients of EU funding in the new member states and the Club Med.

And there it rests for the moment. The chief Spanish EU negotiator on budgetary matters is a former ambassador to Poland and has good relations with his counterparts. But Warsaw remains sulky in spite of attempts by Spanish diplomats in Brussels to patch up the relationship. What fun!